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2024 (6) TMI 978 - AT - Income TaxShort grant of advance tax credit - only prayer is to restore the matter back to the ld. AO for necessary verification - HELD THAT - Accordingly, the claim of the assessee that the ld. AO has not granted tax credit for Tega Industries (SEZ) Limited is restored to the file of the ld. AO for necessary verification. Accordingly, Ground is allowed for statistical purposes. TP adjustment on account of corporate guarantee - international transactions or not? - HELD THAT - As in view of the provisions of Section 92B of the Act, the alleged transactions of corporate guarantee with the AE falls in the category of international transactions. Our view is further supported by the judgment of M/s. Redington (India) Limited 2020 (12) TMI 516 - MADRAS HIGH COURT Accordingly, ground raised by the assessee that the alleged transactions is not an international transactions, is hereby dismissed. Calculation of corporate guarantee fee - As we find that this issue has come up before various judicial forums and corporate guarantee fee range of 0.2% to 0.5% has been found to be justified. We find support from the judgment of CIT v. Everest Kento Cylinders 2015 (5) TMI 395 - BOMBAY HIGH COURT and are inclined to give part relief to the assessee directing the TPO to compute corporate guarantee fee @ 0.5% and delete excess amount added in the hands of the assessee. Accordingly, Ground Nos. 2 3 raised by the assessee are partly allowed.
Issues:
1. Transfer Pricing adjustment on corporate guarantee commission 2. Determination of arm's length price 3. Rule of consistency 4. Loss on investment classification 5. Delay in deposit of employees' contributions 6. Disallowance of deduction under section 80JJAA 7. Arbitrary addition of income 8. Short grant of Advance Tax Credit 9. Short grant of TDS Credit 10. Non-grant of Foreign Tax Credit 11. Erroneous levy of Interest under section 234B 12. Erroneous levy of Interest under section 234C Analysis: Transfer Pricing Adjustment on Corporate Guarantee Commission: The appeal concerns the Transfer Pricing (TP) adjustment on corporate guarantee commission received by the assessee. The assessee provided corporate guarantees to its subsidiaries, Tega Singapore and Tega Chile. The Transfer Pricing Officer (TPO) calculated the corporate guarantee fees at 6.96% for Tega Singapore and added an amount for the guarantee to Tega Chile. The assessee contended that the transactions did not qualify as international transactions and, alternatively, argued for a lower percentage for the corporate guarantee fees. The Tribunal held that the corporate guarantee transactions fell under international transactions as per Section 92B of the Income Tax Act. The Tribunal partially allowed the appeal, directing the TPO to compute the corporate guarantee fee at 0.5% and delete the excess amount added to the assessee's income. Determination of Arm's Length Price: The Tribunal addressed the issue of determining the arm's length price for the corporate guarantee commission received by the assessee. It considered the range of corporate guarantee fees applied in similar cases by various judicial forums, citing the judgment of the Bombay High Court in CIT v. Everest Kento Cylinders. The Tribunal directed the TPO to compute the corporate guarantee fee at 0.5% and eliminate the excess amount added to the assessee's income. Rule of Consistency: The grounds related to rule of consistency, loss on investment classification, delay in deposit of employees' contributions, disallowance of deduction under section 80JJAA, arbitrary addition of income, and short grant of Advance Tax Credit were dismissed as not pressed by the assessee. Interest Levy under Sections 234B and 234C: The Tribunal noted that the issues regarding the levy of interest under sections 234B and 234C were consequential and required no adjudication. Conclusion: The Tribunal partly allowed the appeal for statistical purposes, specifically addressing the Transfer Pricing adjustment on corporate guarantee commission. The Tribunal directed the TPO to recompute the corporate guarantee fee at 0.5% and remove the excess amount added to the assessee's income. The issues related to interest levy under sections 234B and 234C were deemed consequential and did not require separate adjudication.
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